Sparky
7th February 2012, 12:22 PM
Money market fund managers are getting very anxious, and rightfully so, with the two proposals being floated by SEC for how money market funds are treated. This controversial issue seems like one more puzzle piece in the Doom picture that is flying under the radar of the average citizen outside of GSUS Nation.
The two proposals have significant implications about the liquidity of market money holdings, i.e. if you don't hold it, you don't own it. Namely:
One proposal would allow the value of the funds to float, rather than being fixed at $1 per share as it is now. The other would require investors to stagger withdrawals. They could get 97 percent out at once and the remainder after 30 days.
So this means that if you deposit $1000 into a money market account, it may or may not be worth $1000. Or, it may be worth $1000, but you can only have $970 of it on demand.
Wow, this is big stuff, right? One of the cornerstones of our financial system is that money markets provide liquidity, and depositors currently view them as safe, virtual cash. This too me is one of the more visible indications of a crack in the stability of our financial system. Think we'll hear about this on the evening news?
http://finance.yahoo.com/news/fidelity-money-fund-clients-react-131439373.html
The two proposals have significant implications about the liquidity of market money holdings, i.e. if you don't hold it, you don't own it. Namely:
One proposal would allow the value of the funds to float, rather than being fixed at $1 per share as it is now. The other would require investors to stagger withdrawals. They could get 97 percent out at once and the remainder after 30 days.
So this means that if you deposit $1000 into a money market account, it may or may not be worth $1000. Or, it may be worth $1000, but you can only have $970 of it on demand.
Wow, this is big stuff, right? One of the cornerstones of our financial system is that money markets provide liquidity, and depositors currently view them as safe, virtual cash. This too me is one of the more visible indications of a crack in the stability of our financial system. Think we'll hear about this on the evening news?
http://finance.yahoo.com/news/fidelity-money-fund-clients-react-131439373.html